Chrysler Group LLC (CGC), the U.S. automaker controlled by Italy’s Fiat SpA (F), proposed the rate it will pay on a $2.93 billion term loan on which it’s seeking to cut costs, according to a person with knowledge of the transaction.
The company is offering to pay interest at 2.75 percentage points more than the London interbank offered rate, with a minimum on the lending benchmark of 0.75 percent to 1 percent, said the person, who asked not to be identified because the terms are private.
Chrysler, which last month delayed an initial public offering, is seeking to lower the interest rate on the debt for a second time this year amid unprecedented investor demand for leveraged loans. A record $62.2 billion has poured into funds that buy floating-rate debt this year, according to a Dec. 5 report from Bank of America Corp.
The debt maturing in May 2017 will be offered at par, the person said. Morgan Stanley, Citigroup Inc., Bank of America and Goldman Sachs Group Inc. are arranging the financing and request commitments by Dec. 13 at 10 a.m. New York time.
Lenders would receive six months of call protection at 101 cents, meaning that Chrysler would have to pay a one cent premium to reprice the debt in its first six months, the person said.
The company, based in Auburn Hills, Michigan, currently pays interest at 3.25 percentage points more than Libor with a 1 percent minimum on the lending benchmark, according to data compiled by Bloomberg. The loan was quoted at 100.63 cents on the dollar today, according to prices compiled by Bloomberg.
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